USB 10-Q Quarter ended June 30, 2012

OVERVIEW

Earnings Summary U.S. Bancorp and its subsidiaries (the “Company”) reported net income attributable to U.S. Bancorp of $1.4 billion for the second quarter of 2012, or $.71 per diluted common share, compared with $1.2 billion, or $.60 per diluted common share for the second quarter of 2011. Return on average assets and return on average common equity were 1.67 percent and 16.5 percent, respectively, for the second quarter of 2012, compared with 1.54 percent and 15.9 percent, respectively, for the second quarter of 2011. The provision for credit losses was $50 million lower than net charge-offs for the second quarter of 2012, compared with $175 million lower than net charge-offs for the second quarter of 2011.

Total net revenue, on a taxable-equivalent basis, for the second quarter of 2012 was $378 million (8.1 percent) higher than the second quarter of 2011, reflecting a 6.6 percent increase in net interest income and a 9.7 percent increase in noninterest income. The increase in net interest income over a year ago was largely the result of an increase in average earning assets and continued growth in lower cost core deposit funding. Noninterest income increased over a year ago, primarily due to higher mortgage banking revenue and merchant processing services revenue, partially offset by lower debit card revenue.

Noninterest expense in the second quarter of 2012 was $176 million (7.3 percent) higher than the second quarter of 2011, primarily due to higher compensation expense, employee benefits costs, mortgage servicing review-related professional services costs and other expense, including an accrual recorded by the Company in the second quarter of 2012 related to its portion of obligations associated with Visa Inc. litigation matters (“Visa accrual”).

The provision for credit losses for the second quarter of 2012 of $470 million was $102 million (17.8 percent) lower than the second quarter of 2011. Net charge-offs in the second quarter of 2012 were $520 million, compared with $747 million in the second quarter of 2011. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

The Company reported net income attributable to U.S. Bancorp of $2.8 billion for the first six months of 2012, or $1.38 per diluted common share, compared with $2.2 billion, or $1.12 per diluted common share for the first six months of 2011. Return on average assets and return on average common equity were 1.64 percent and 16.3 percent, respectively, for the first six months of 2012, compared with 1.46 percent and 15.2 percent, respectively, for the first six months of 2011. Included in the Company’s results for the first six months of 2011 was a $46 million gain related to the acquisition of First Community Bank of New Mexico (“FCB”) in a transaction with the Federal Deposit Insurance Corporation (“FDIC”). The provision for credit losses was $140 million lower than net charge-offs for the first six months of 2012, compared with $225 million lower than net charge-offs for the first six months of 2011.

Total net revenue, on a taxable-equivalent basis, for the first six months of 2012 was $788 million (8.6 percent) higher than the first six months of 2011, reflecting a 7.0 percent increase in net interest income and a 10.5 percent increase in noninterest income. The increase in net interest income over a year ago was largely the result of an increase in average earning assets and continued growth in lower cost core deposit funding. Noninterest income increased over a year ago, primarily due to higher mortgage banking revenue, merchant processing services revenue and commercial products revenue, partially offset by lower debit card revenue.

Noninterest expense in the first six months of 2012 was $422 million (8.9 percent) higher than the first six months of 2011, primarily due to higher compensation expense, employee benefits costs, mortgage servicing review-related professional services costs, marketing and business development costs and other expense, including higher regulatory and insurance-related costs and the second quarter 2012 Visa accrual.

The provision for credit losses for the first six months of 2012 of $951 million was $376 million (28.3 percent) lower than the first six months of 2011. Net charge-offs in the first six months of 2012 were $1.1 billion, compared with $1.6 billion in the first six months of 2011. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

Net Interest Income Net interest income, on a taxable-equivalent basis, was $2.7 billion in the second quarter of 2012, compared with $2.5 billion in the second quarter of 2011. Net interest income, on a taxable-equivalent basis, was $5.4 billion in the first six months of 2012, compared with $5.1 billion in the first six months of 2011. The increases were primarily the result of growth in both average earning assets and lower cost core deposit funding. Average earning assets increased $26.2 billion (9.4 percent) in the second quarter and $26.1 billion (9.5 percent) in the first six months of 2012, compared with the same periods of 2011, driven by increases in investment securities and loans. The net interest margin in the second quarter and first six months of 2012 was 3.58 percent and 3.59 percent, respectively, compared with 3.67 percent and 3.68 percent in the second quarter and first six months of 2011, respectively. The decreases in the net interest margin reflected increased lower-yielding investment securities and lower loan yields, partially offset by lower deposit rates, reductions in average cash balances held at the Federal Reserve, as well as the inclusion of credit card balance transfer fees in interest income beginning in the first quarter of 2012. Refer to the “Consolidated Daily Average Balance Sheet and Related Yields and Rates” tables for further information on net interest income.

Total average loans for the second quarter and first six months of 2012 were $15.3 billion (7.7 percent) and $13.9 billion (7.0 percent) higher, respectively, than the same periods of 2011, driven by growth in commercial loans, residential mortgages, credit card loans and commercial real estate loans. Impacting average credit card balances during 2012, was the purchase in late

December of 2011 of $700 million of consumer credit card loans. The increases were partially offset by declines in other retail loans and loans covered by loss sharing agreements with the FDIC. Average loans acquired in FDIC-assisted transactions that are covered by loss sharing agreements with the FDIC (“covered” loans) decreased $3.0 billion (17.7 percent) in both the second quarter and first six months of 2012, compared with the same periods of 2011, respectively.

Average investment securities in the second quarter and first six months of 2012 were $10.2 billion (16.2 percent) and $12.6 billion (21.2 percent) higher, respectively, than the same periods of 2011, primarily due to purchases of government agency mortgage-backed securities, as the Company increased its on-balance sheet liquidity in response to anticipated regulatory requirements.

Average total deposits for the second quarter and first six months of 2012 were $21.9 billion (10.5 percent) and $22.9 billion (11.1 percent) higher, respectively, than the same periods of 2011. Average noninterest-bearing deposits for the second quarter and first six months of 2012 were $15.8 billion (32.5 percent) and $17.6 billion (37.9 percent) higher, respectively, than the same periods of 2011, due to growth in average balances in a majority of the lines of business, including Wholesale Banking and Commercial Real Estate, Wealth Management and Securities Services, and Consumer and Small Business Banking. Average total savings deposits for the second quarter and first six months of 2012 were $5.1 billion (4.4 percent) and $6.8 billion (6.0 percent) higher, respectively, than the same periods of 2011, primarily due to growth in Consumer and Small Business Banking balances, partially offset by lower broker-dealer deposits and government banking balances. Average time certificates of deposit less than

$100,000 were slightly lower in the second quarter and first six months of 2012, compared with the same periods of 2011. Average time deposits greater than $100,000 were $1.6 billion (5.3 percent) higher in the second quarter and $1.1 billion (3.4 percent) lower in the first six months of 2012, compared with the same periods of 2011, respectively. Time deposits greater than $100,000 are managed as an alternate to other funding sources such as wholesale borrowing, based largely on relative pricing.

Provision for Credit Losses The provision for credit losses for the second quarter and first six months of 2012 decreased $102 million (17.8 percent) and $376 million (28.3 percent), respectively, from the same periods of 2011. Net charge-offs decreased $227 million (30.4 percent) and $461 million (29.7 percent) in the second quarter and first six months of 2012, respectively, compared with the same periods of 2011, principally due to improvement in the commercial, commercial real estate, credit card and other retail portfolios. The provision for credit losses was lower than net charge-offs by $50 million in the second quarter and $140 million in the first six months of 2012, compared with $175 million in the second quarter and $225 million in the first six months of 2011. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

Noninterest Income Noninterest income in the second quarter and first six months of 2012 was $2.4 billion and $4.6 billion, respectively, compared with $2.1 billion and $4.2 billion in the same periods of 2011. The $209 million (9.7 percent) increase during the second quarter and the $436 million (10.5 percent) increase during the first six months of 2012, compared

with the same periods of 2011, were primarily driven by strong mortgage banking revenue, principally due to higher origination and sales revenue. In addition, merchant processing services revenue increased, primarily due to higher transaction volumes. Commercial products revenue was also higher for the first six months of 2012, compared with the same period of 2011, the result of higher loan commitment and syndication fees and bond underwriting fees. Other income increased in the second quarter and first six months of 2012, compared with the same periods of 2011, primarily due to higher retail lease residual revenue and equity investment income. The increase in other income for the first six months of 2012 was partially offset by the FCB gain and a gain related to the Company’s investment in Visa Inc., both recorded in the first quarter of 2011. Also offsetting these positive variances were decreases in credit and debit card revenue due to lower debit card interchange fees as a result of fourth quarter of 2011 legislation (estimated impact of $81 million in the second quarter and $157 million in the first six months of 2012), net of mitigation efforts, and the impact of the inclusion of credit card balance transfer fees in interest income beginning in the first quarter of 2012. These negative variances were partially offset by higher transaction volumes and an $18 million credit related to expired debit card customer rewards recorded in the second quarter of 2012. ATM processing services revenue was also lower, due to excluding surcharge fees the Company passes through to others from revenue beginning in the first quarter of 2012, rather than reporting those amounts in occupancy expense as in previous periods. In addition, the second quarter and first six months of 2012 had unfavorable changes in net securities losses, compared with the same periods of the prior year, as the Company recognized impairment on certain perpetual preferred securities in the second quarter of 2012 as a result of recent downgrades of money center banks by a rating agency.

Noninterest Expense Noninterest expense was $2.6 billion in the second quarter and $5.2 billion in the first six months of 2012, compared with $2.4 billion and $4.7 billion in the same periods of 2011, or increases of $176 million (7.3 percent) and $422 million (8.9 percent), respectively. The increases in noninterest expense from a year ago were principally due to higher compensation expense, employee benefits expense, professional services expense and other expense. Compensation expense increased primarily as a result of growth in staffing for business initiatives and mortgage servicing-related activities, in addition to merit increases. Employee benefits expense increased principally due to higher pension costs and staffing levels. Professional services expense was higher, principally due to mortgage servicing review-related projects. Technology and communications expense was higher due to business expansion and technology projects. Marketing and business development expense for the first six months of 2012 increased over the same period of the prior year due to the timing of charitable contributions and payments-related initiatives. Other expense increased in the second quarter and first six months of 2012 over the same periods of the prior year, driven by higher mortgage servicing costs and the second quarter 2012 Visa accrual, partially offset by lower FDIC insurance expense. In addition, other expense for the first six months of 2012 increased over the same period of the prior year due to higher regulatory and insurance-related costs. These increases were partially offset by decreases in net occupancy and equipment expense, principally reflecting the change in presentation of ATM surcharge revenue passed through to others.

Income Tax Expense The provision for income taxes was $564 million (an effective rate of 29.0 percent) for the second quarter and $1.1 billion (an effective rate of 28.9 percent) for the first six months of 2012, compared with $458 million (an effective rate of 28.0 percent) and $824 million (an effective rate of 27.2 percent) for the same periods of 2011. The increases in the effective tax rate for the second quarter and first six months of 2012, compared with the same periods of the prior year, principally reflected the impact of higher pretax earnings year-over-year. For further information on income taxes, refer to Note 9 of the Notes to Consolidated Financial Statements.

Loans The Company’s total loan portfolio was $216.1 billion at June 30, 2012, compared with $209.8 billion at December 31, 2011, an increase of $6.3 billion (3.0 percent). The increase was driven

primarily by increases in commercial loans, residential mortgages and commercial real estate loans, partially offset by lower credit card, other retail and covered loans. The $4.9 billion (8.6 percent) increase in commercial loans was driven by higher demand from new and existing customers.

Residential mortgages held in the loan portfolio increased $2.8 billion (7.7 percent) at June 30, 2012, compared with December 31, 2011, reflecting origination and refinancing activity due to the low interest rate environment. Most loans retained in the portfolio are to customers with prime or near-prime credit characteristics at the date of origination.

Commercial real estate loans increased $706 million (2.0 percent) at June 30, 2012, compared with December 31, 2011, reflecting higher demand from new and existing customers and acquired balances.

Total credit card loans decreased $455 million (2.6 percent) at June 30, 2012, compared with December 31, 2011, the result of customers spending less and paying down their balances. Other retail loans, which include retail leasing, home equity and second mortgages and other retail loans, decreased $72 million (.1 percent) at June 30, 2012, compared with December 31, 2011. The decrease was primarily driven by lower home equity and second mortgages and student loan balances, partially offset by higher installment loan and retail leasing balances.

Loans Held for Sale Loans held for sale, consisting primarily of residential mortgages to be sold in the secondary market, were $8.3 billion at June 30, 2012, compared with $7.2 billion at December 31, 2011. The increase in loans held for sale was principally due to an increase in mortgage loan origination and refinancing activity due to the low interest rate environment.

Most of the residential mortgage loans the Company originates follow guidelines that allow the loans to be sold into existing, highly liquid secondary markets; in particular in government agency transactions and to government sponsored enterprises (“GSEs”). The Company also originates residential mortgages that follow its own investment guidelines, primarily well secured jumbo mortgages to borrowers with high credit quality, and near-prime non-conforming mortgages, with the intent to hold such loans in the loan portfolio. The Company generally retains portfolio loans through maturity; however, the Company’s intent may change over time based upon various factors such as ongoing asset/liability management activities, assessment of product profitability, credit risk, liquidity needs, and capital implications. If the Company’s intent or ability to hold an existing portfolio loan changes, it is transferred to loans held for sale.